Real-Estate Investors, House Prices and Rents: Evidence from Capital-Gains Tax Changes

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We study the dual role of real-estate investors – households who own multiple housing units – in ownership and rental housing markets in Israel. Exploiting a series of capital gains tax changes and rich administrative data, we first show that real-estate investors that were subject to an unexpected temporary capital-gains tax exemption increased their sales of housing units by 50%. Predominantly, the housing units sold by investors were purchased by single homeowners and were previously occupied by renters. Next, we exploit spatial variation in the share of the housing stock owned by investors across 360 local markets to examine how investors’ activity induced by the tax changes affected local house prices and local rents. We present evidence that a 1 percentage point increase in investors’ sales out of stock led house prices to decrease by 14% and rents of new leases to increase by 4%. These effects are larger for smaller and older units, in which investors own a larger share of the stock of housing units. The results suggest that policies that encourage investors to sell can achieve their stated objective of reducing house prices, but also run the risk of restricting the supply of rental housing, and thus adversely affecting renters.


Type of resource text
Date created September 10, 2021


Author Ater, Itai
Author Elster, Yael
Author Hoffmann, Eran
Organizer of meeting Diamond, Rebecca
Organizer of meeting van Dijk, Winnie
Organizer of meeting Schneider, Martin
Organizer of meeting Tsivanidis, Nick


Subject economics
Genre Text
Genre Working paper
Genre Grey literature

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This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).

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Ater, I., Elster , Y., and Hoffmann, E. (2022). Real-Estate Investors, House Prices and Rents: Evidence from Capital-Gains Tax Changes. Stanford Digital Repository. Available at


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